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Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 11-27-2006

Medicaid Spending Sees First Decline
USA Today, 11-27-06

Editor's Notes:

USA Today reports that a combination of cost–management programs and the shift of drug costs for millions of poor elderly patients to Medicare has led to a decline in Medicaid spending for the first time "since the health program for the poor was created in 1965."

State and federal policymakers should use this unexpected windfall to consider bold experiments in Medicaid reform. For instance, Congress can borrow a page from welfare reform and "block grant" Medicaid funding to the states. This could trade off a temporary, but significant, increase in federal spending in return for a cap on future spending that would limit federal contributions to Medicaid. This would put much greater pressure on states to spend their Medicaid dollars effectively, and spur even more innovation at the state level. When the states effectively "own" Medicaid spending, they will find a way to control it.

The historic reversal will free up billions of dollars in state budgets. Medicaid has been the fastest–growing expense for states over the past 10 years.

Medicaid spending fell 1.4% in the first nine months of the year compared with the same period a year ago, according to the Bureau of Economic Analysis. The drop was even greater—an unprecedented a 5.4% decline—after adjusting for the rate of health care inflation.

The spending has been reduced by cost–controlling efforts and a shift of some prescription–drug expenses to Medicare, the federal health program for the elderly.

"States have made really aggressive changes in how care is managed in Medicaid," Arizona Medicaid Director Anthony Rodgers said. "Every state has taken a different approach, but the success can be seen almost everywhere."

Medicaid provides health care to 56 million poor Americans. The federal government sets broad rules for the program and pays 57% of the expense. States run the program and pay 43% of the cost.

The program is on track to spend $300 billion in federal and state money in 2006, the Bureau of Economic Analysis reports.

[permanent link]

McMedical Care
Governing Magazine, 12-1-06

Editor's Notes:

The December issue of Governing magazine focuses on the growing phenomenon of small, retail health clinics that offer a wide range of basic health services at a fraction of the cost of a traditional doctor's office. This is just one small but powerful example of how market forces applied to health care can cut costs and improve consumer satisfaction.

There's a health care revolution underway. But it's not being fomented by doctors and hospitals or by governors and legislators. Rather, the seeds of a radical new approach to delivering health services are taking root deep in the heart of an industry whose life's blood is efficiency and affordability. Wal–Mart, Target, CVS and a host of other chain stores are setting up retail clinics: medical outposts that sit inside their stores, right alongside the shampoo, Pampers and ketchup.

Customers can walk into the clinic, see a price list for services, sign up for an Appointment and, if the wait will be more than a couple of minutes, cruise the store aisles for Christmas wrap or a can of soup. Retail clinics may appear to be nothing more than good business forthe retailers that host them—a simple service that brings shoppers into the store and boosts profits for their pharmacies.

For state and local governments, though, the clinics are laboratories of change and officials are watching to see how they might impact health policy and regulation. Their low prices and convenience (clinics are open evenings, weekends and some holidays) meet a need that the existing health care system does not. But the radical nature of the clinics goes beyond that. They are, in effect, deconstructing medical care—doing unto the health care system what the global economy and outsourcing have done to other industries: picking off routine tasks that can be performed by less–skilled, lower–paid workers and making an efficient, patient–friendly business out of it.

There's more afoot. The retail clinics may suggest a way around the misuse of emergency rooms for primary care. They could even have implications for Medicaid and the way state programs deliver basic care to beneficiaries during non-office hours. "Primary care is a neglected field in the United States, lagging other economically advanced countries," says Uwe E. Reinhardt, a professor of economics and public affairs at Princeton University. The clinics can teach the rest of our health system how primary care could be done and brought to the public.

The danger is that regulators and vested interests will see the growth of these clinics as a threat and move to burden them with expensive regulations that will drive up costs and reduce their attractiveness. Still, state legislators should look closely at these clinics and examine how they might be used to improve health care options for the Medicaid patients and the low–income uninsured.

[permanent link]



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